Amid coronavirus economic recovery, Ohio can help prevent a consumer debt crisis

As Ohio reopens with mounting uncertainty, we see promising signs of recovery from COVID-19. But the hope for economic recovery locally and nationwide will be tempered as millions of Americans confront paying down debt they accrued while unemployed for months.

American families that lost jobs or were furloughed and small business owners dealing with massive revenue reductions face crushing credit card and medical expenses. Since mid-March, more than 50 million Americans, including more than a million Ohioans, are unemployed. These are our family and neighbors, many who own small businesses in our communities.

They now risk falling further behind on debts, additionally straining our already shaky economy. Consumers fortunate enough to receive temporary forbearance will face a harsh reality as programs end. No doubt, delinquent consumer debt will cause bankruptcies and foreclosures, flooding our courts and weakening our communities.

Consumers are scrambling for relief from creditors. But as in the 2008 crisis, most creditors are ill-prepared for the dramatically increased demand for customer service. Vulture marketers and scammers are bombarding consumers with empty promises. The environment confuses and stresses consumers trying to make smart credit decisions.

Fortunately, we know what needs to be done to assist these struggling Americans. In 2008, the federal government funded programs to help consumers restructure debt repayments with sustainable long-term modifications. The government established a centralized response involving not-for-profit counselors and lenders to create a smooth system for consumers, and it worked.

In response to the COVID crisis, nonprofit credit counselors, many of whom are accredited by the National Foundation for Credit Counseling, can help millions of American families and small businesses right-size their debt. Credit counselors navigate consumers through payments to multiple creditors, combining obligations into one payment. Consumers receive support for all their accounts simultaneously, so they get the information needed to make intelligent decisions.

Research shows nonprofit credit counseling is effective in steering consumers toward financial well-being. A study from Ohio State University showed consumers working with counselors reduced their debt and grew savings more than those without this support. These services have a proven track record of success.

As part of a nationwide response to the COVID-19 challenge, Apprisen, a nonprofit credit counseling agency based in Ohio and member of the National Foundation for Credit Counseling, has worked alongside nearly 80 nonprofit U.S. credit counseling agencies, creditors and banks to launch a new, nationwide program for people in financial distress from the coronavirus crisis. Together with these leaders, Apprisen has coordinated closely with regulators in developing a simple, specific scalable solution.

Now is the time for Congress to step in and support counseling as an essential component of coronavirus relief. Rep. Steve Stivers, a Republican from Columbus, and Representative David Scott, a Democrat from Georgia, are leading a bipartisan effort to push for substantial federal funding for two years of credit counseling, calling for funds to reach millions of households. In a letter to House leadership, the representatives wrote, “By investing in credit counseling, we can support the financial stability of American families and small businesses and prevent a wave of bankruptcies and bailouts that would further undermine our economy.”

The potential savings that could result from programs such as these are substantial — nonprofit credit counseling could help millions of consumers avoid bankruptcy and save communities $5.5 billion in foreclosures and community costs. Overall, counseled Americans could have a sustainable way to repay more than $11 billion in restructured debt, providing stability to our economy.

Nonprofit credit counseling is a proven solution. Additional federal support for these essential programs will spur our nation’s economic recovery, reduce future dependency on overwhelmed community resources and ensure those Ohioans hit hardest during the economic shutdown have a chance for long-term financial recovery as well.